I am a Managing Partner at Brookside Strategies, LLC, an energy and utility management consulting firm based in Darien, Connecticut. I've spilled blood, sweat and tears grappling with the full spectrum of barriers and misconceptions about distributed generation and energy-efficiency technologies. Previously, I practiced law in New York City at Paul Weiss Rifkind Garrison & Wharton, LLP and Jenner & Block, LLP. I also attended journalism school at Columbia University and earned a JD at Stanford Law School. I've written about energy and environmental issues for Forbes, The Nation, Mother Jones and several other publications. I am the Chair of the Northeast Clean Heat and Power Initiative. Drop me a line - or two - at wmp@cleanbeta.com.

The Case For A Green Bank

The political tempests triggered by last year’s Solyndra “scandal” have soured many people’s enthusiasm for green energy, especially when publicly-funded subsidies are involved. Ken Berlin, the Senior Vice-President for Policy and General Counsel for the Coalition for Green Capital and a retired partner of the law firm Skadden Arps, is not one of them and he is ready to walk the chalk when it comes to defending his views.

Berlin is one of the clean-energy policy geniuses responsible for the ambitious Green Bank initiative underway in the state of Connecticut, which several other states have reportedly expressed interested in replicating. Berlin was kind enough to contribute the post featured below, “Why A Green Bank?,” making his case for supporting green banks for Forbes readers. I am interested to know what Forbes readers think.

Why A Green Bank?

Green Banks are intended to provide low cost financing to clean energy projects. Low cost lending can substantially reduce the cost of a clean energy project, making it cost competitive with fossil fuel generation or close to cost competitive and thus requiring much lower subsidies. Because it is providing loans or loan guarantees, the funders of the green bank can be repaid. In contrast to government grants, loans can be used to set up revolving funds. Because a green bank would be a funding institution, it could conservatively leverage its scarce government and private funding.

Green banks can and should be set up as public private partnerships, allowing further leverage of government funds. The government would put in funding at a very low interest rate to the green bank and private investors would put in matching funds and receive a reasonable rate of return. When averaged, the rate of return on public and private funds would allow the bank to make low interest loans.

Green banks will help, not hurt, existing commercial banks and lenders. In many cases the green bank will provide enough low cost funding so that when matched by commercial funding, the tranche provided by the bank would make the project financially viable to the developer. Commercial banks will benefit because they will be able to earn a rate of return on projects which they could not finance on their own.

Green banks are needed to lower the cost of clean energy projects because they are particularly sensitive to cost constraints. . Most technologies that generate electricity, no matter how exciting, don’t offer anything new to a consumer. When energy generation is involved, all the consumer receives is a flow of electrons that is identical to the flow of electrons from older technologies. Since the consumer is not receiving anything new, consumers oppose paying more. And consumers have a weapon to block price increases – they can go the regulators of the energy suppliers and ask them to block any price increases. Thus, using a Steve Jobs phrase, without some sort of support, even an insanely great new energy technology cannot be sold if it costs even a small amount more then fossil fuel generated energy.

There are sound economic and other reasons why new, clean technologies like wind, solar, advanced biofuels and batteries should be supported even though they currently cost more then fossil fuel technologies.

First, all of these technologies are becoming less expensive each year with every prospect that one day they will be fully competitive on their own with existing fossil fuel plants or new natural gas plants.

Second, it does not work to say wait for new technologies. Many of the advances in the energy field have been incremental, based on learning from the deployment of a technology. And, there is no guarantee that a new technology will be cost competitive in its early iterations.

Third, the clean technology industry is likely to be a multi trillion dollar industry on the global level. Other countries will support these industries until they become cost competitive, and if the U.S. doesn’t, it will lose this market, and for the first time in over a century, it will not be a player in a key technology business.

Fourth, support for clean energy is designed to correct a market failure. Fossil fuel companies do not take into account the external effect of the cost of pollution or carbon emissions. So the most obvious benefit of clean technologies – they are almost pollution free – is not priced into the cost of electricity.

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Mr. Berlin hits a very important nail squarely on the head when he writes that green energy, as we know it today, merely provides “a flow of electrons that is identical to the flow of electrons from older technologies.” In fact, the challenge is more pronounced. Many forms of green energy do not provide the same reliability as older technologies. For example, the solar and wind farms that do not generate electricity at night or during windless hours. Which means that the real problem is not the availability of financing, but the availability of green energy technologies with the same or better levels of reliability and convenience than older technologies. Traditionally, we have overcome these challenges by having the government leverage its investments in new technologies by financing research and development in the military, the space program, and at research universities.

I am all in favor of a system that would take the GREEN movement off of the government (yours and mine pocket) rolls. What we have now is just another entitlement program but a transfer of wealth to a few well connected and ill willed individuals.

Green is a dream. If you want green then redefine society to adapt to the constants of green.

Green will NOT be on 24/7. At best, with the technology of the next 10 years, we can offer 75% up-time.

Now, think about the carbon foot print to make green technology. On average, green cost 2x dollars and 2-5x in carbon on the life cycle.

Actually, the Green Bank concept has been around for nearly a century, and began, in an unlikely commune in the Italian Alps during World War I amongst a group of artists that included Herman Hesse. More expressly, with the advent of Socially Responsible Investing in the 1980s in Japan, and then the renaissance of triple, even quadruple bottom line think tanks abetting portfolio management R&D, this multi-trillion dollar “investing with your conscience” boom has long provide a variety of telling conduits for those who are intent upon prudent asset allocation that comports with their environmental and ethical convictions. It has long been established. A “bank” merely enshrines this long-standing tradition with additional regulatory safeguards and investor backed securities, critical corollaries, to be sure, particularly for institutional investors.

In the case of fresh water and protein-rich legumes, futures in sustainability are two of the key gaps in lending that are equal to or exceed the energy components Mr. Berlin addresses in his “flow of electrons” analogies. These were the basic gaps that prompted the Grameen Bank and others like it in their early days.

I would recommend readers to look at my Forbes piece last year in April, http://www.forbes.com/sites/michaeltobias/2011/04/28/investing-in-the-end-game-an-earth-day-post-mortem/ that highlights some of these particulars, as well as downloading the book, God’s Country: The New Zealand Factor, www.dancingstarbooksfilms.org/gods-country-the-new-zealand-factor/ … a 600-page ecological, ethical and economic analysis of the first decade of the 21st century, with much on ecological banking and SRI. This book is free to download. Michael Tobias and Jane Gray Morrison/Dancing Star Foundation

John – thanks for your comment, but you are missing a very basic point. Renewable energy is intermittent and won’t provide baseline power until better storage batteries are developed or grids are made larger so that power from various parts of the grid can be balanced out. But that does not mean that renewables do not generate a very large amount of power. Take Texas as an example. “On December 11, 2010 at 7:16 AM, ERCOT set a record for instantaneous wind generation of 7,227 MW (76.3% of installed capacity), breaking the previous record set on June 12, 2010 of 7,016 MW (75.3% of installed capacity). This event also set a new ERCOT record for the highest percentage of load served by wind at 25.8% of the total load served at that time. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&ved=0CDUQFjAC&url=http%3A%2F%2Fwww.ercot.com%2Fcontent%2Fmeetings%2Ftac%2Fkeydocs%2F2011%2F0303%2F11._ETIP_Quarterly_Report-4th_Quarter2010_Final_Revised_III_.doc&ei=3UAPT_LLC8SOsALnhIzUAw&usg=AFQjCNEQP-pHAXe_hnYKBtnmJKfDw6GnUw. Thus, renewables will continaually drop in cost, they will be better integrated with new transmission and storage, and more research will create better products, but renewables are being succesfully deployed today and the technology of renewables is way beyond the research only stage.